Pensions and the self-employed
I spoke to a builder last year about some work that I may have done. In the conversation, I asked how many people worked for him; 27 he says. “Ah” say I, “Have you set up a pension scheme for them?” “Oh no, I don’t employ them, I just give them all their work. They are self-employed.”
This story keeps going round in my head. There are 27 individuals who are completely dependent on this builder to find them work and to pay them. Yet, as self-employed workers they are personally responsible for their income; what to spend, what to put aside and what to save. I wonder whether these 27 individuals are culturally in the space of taking that individual responsibility.
The total number of self-employed workers is fast catching up with the numbers in the public sector. Since the crash of 2008, the shape of employment has changed. In 1975, only 8.7% of the workforce worked for themselves. By 2008, that had risen to about 12% and is now growing to close on 16% of the workforce. The self-employed may soon overtake the public sector.
The proportion of our customers that are self-employed is small (4%); too small. Self-employed people do not have the benefit of support in the workplace. The majority of self-employed people that do contact us have come out of employment and moving into self-employment. These people have a reference point from their employment on what to spend, what to put aside and what to save and the questions they ask us are around setting up and contributing to a pension scheme, State pension entitlement, previous pensions and tax. What about the self-employed who have never been employed? And the technically self-employed, like the 27 individuals in this story, who behaviourally act like employees yet must be individually responsible for their current and future income?
Understandably, self-employed people have pressures on their time so are more likely to concentrate on the more immediate financial requirements rather than pensions or long term financial security. Yet, regardless of employment status, most of us would like to be able to choose to stop work one day and choose how we live when we do. A pension is a good way to achieve that.
How can we do more to help support the self-employed?
If you'd like more information about pension saving or have questions about a pension you have, please contact our team on 0300 123 1047 (Mon-Fri 9-5).